Gift cards are a terrible present — unless you're giving them to yourself to multiply your reward points.
If you haven’t noticed, gift cards are very popular. You see huge racks of them at the gas station, the grocery store, office supply stores, and even at home improvement stores.
Personally, I think that they make for very uninspired gifts. But as a credit card rewards enthusiast, I buy them all the time.
As it turns out, there are many compelling uses for these ubiquitous financial instruments. Here are a few of my favorites…
1. Time shifting your spending
Let’s say you open up a new credit card that offers a big sign-up bonus, but only if you spend a certain amount within a specified time period. The problem is that you’re really frugal, and you don’t plan on spending that much money so quickly.
No problem! Just buy gift cards now for use later. For example, you could buy gift cards for gas or grocery stores, your favorite restaurant, or you could just buy a generic Visa, MasterCard, or American Express cards, although the latter will have small fees attached.
2. Place shifting your spending
Let’s say you have a Chase Ink card that offers 5x points at office supply stores, but you don’t have much need for overpriced envelopes and whatnot. Not to worry: Most office supply stores have a vast supply of gift cards.
Choose anything from Amazon.com gift cards (super flexible) to those from your favorite restaurant or even toy stores, and enjoy 5x rewards all over town. The same trick works with cards that offer big bonuses at supermarkets and even gas stations.
3. Manufactured spending
Now we’re really getting into the black arts of the credit card rewards hobby. The idea behind manufactured spending is that you purchase things with your credit card that you somehow cash out. You then use your cash to pay off your credit card bill — and keep any rewards that you earned.
Unfortunately, most manufactured spending techniques involve so many fees that the value of the rewards earned may barely exceed the cost. And when you factor in time, hassle, and risk, it becomes extremely hard to find a way to create credit card points and miles out of thin air.
Another aspect of manufactured spending is that those who do it successfully rarely offer up their secrets. It’s a fine art, bordering on magic. They fear that if too many people know what they’re doing, then the loopholes will be closed.
Thankfully, I’m somewhat generous with my secrets.
Right now, I find that the best way to create points is to buy generic gift cards at office supply stores. In fact, one major store will frequently offer rebates on the sale of generic gift cards. I’ll let you take it from there.
By closely examining the gift card rack at your favorite store, you can find some very interesting ways to maximize your credit card rewards. But please choose something a bit more thoughtful for you next gift — maybe with all your reward points.